Small businesses must be helped by fintechs to lessen shock of worldwide pandemic
The COVID-19 pandemic has severely crippled the global economy. While social distancing measures have been vital to securing people’s lives and enabling effective governmental responses to the pandemic, Fintechs SMEs around the world have been hit hard by these necessary measures.
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Social distancing measures put in place in a majority of the world’s economies have forced many small businesses to shut their doors and have brought many to the brink of collapse. As public health outcomes are improving, regulators and major financial institutions must turn to preserve the futures of SMEs in order to soften economic shocks.
SMEs and COVID-19
Globally, small and medium businesses (SMEs) account for more than half of most countries’ GDP and provide 70% of jobs in a majority of economies. During this pandemic they have been hit from three directions, severely hampering their ability to continue operations and putting their futures at risk.
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One, social distancing measures and closures have hurt the incomes of most SMEs, excluding those operating online only. Two, disrupted supply chains are impeding the ability of SMEs to resume normal operations even when restrictions are loosened. And, crucially, three, many SMEs are once again faced with inadequate access to banking services and financing. The latter of which is especially vital in the face of the pandemic and for any attempt at recovery.
The problem of financing is not new, with less than 15% of SMEs in fast-growing economies having adequate access to financing before the pandemic. A May 2020 European Central Bank report indicates that even before the onset of the pandemic, European SMEs reported worsening access to financing, due to decreased willingness of banks to provide credit and their own worsening financial situations. In the wake of the pandemic the problem has only worsened due to a mix of inadequate government response and cautious financial institutions.
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